Hey guys,
What are the challenges facing SM and KC in near and future (3 years)?
Some immediate i can think of:
1. Impairment in receivables/losses in marine sector
2. Impairment in assets in brazil?
3. Cut dividends
4. Order book clarity
5. Sete brazil bankruptcy
Survival
1. How to sustain in low oil prices for next 3 years
2. Capital allocation - Which business line will get priority and which will get chop
3. Fundings - Cost of funding
Hi Alex,
Below are further inputs
SembMarine Surivival
- Sale of shipyard at Sembawang and maybe another area for funds after moving to Tuas Yard
Challenges of KC
- Slowing ppty market in China and SG- Evident by Keppel's no of unsold units
- Danger of subsidiaries asking money - Krisenergy and Keppel REIT
Survival of KC
- Funding from shareholders, raising more bonds
Thanks.
One more thing to add, is looking for bottom of oil prices, follow by gradual rebound and not V shape that many are expecting.
Dont you pp think KC is a better or safer buy compared to SM? At least its business is diversified. For the next 5 to 10 years I think SM can eat grass liao since likely no rig orders. I rather buy Sembcorp than SM.
IMO
Depends on what you want. If you buy into a diversified company, there is always the holding company discount to consider.
Furthermore, in terms of pure play, SM is a top choice if you want to bet on recovery. Of course, its a one way tix down currently since it is so pure. But, SCI is catching up, there's no running. Big companies move slower, smaller ones (less complex), are faster to change and make decisions.
Maybe, they really have to create a SPV to hold unsold rigs and drillships, and list this in future? Who knows..
In times like this, its not an easy call.
(Not vested)